$3.8 trillion in assets backlog remains hard to digest; Bain & Company: The duration of the private equity industry's predicament has surpassed that of 2008.

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The private equity industry is undergoing a deep adjustment that has lasted longer than the 2008 financial crisis. According to the latest Bain & Company report, the industry has returned less profit to investors for the fourth consecutive year while holding $3.8 trillion in unsold assets; new fund fundraising is facing difficulties.

In 2025, the distribution ratio of private equity as a proportion of net asset value remains at 14%, the second-lowest level since the peak of the 2008 financial crisis. Although transaction value grew 44% last year to $904 billion compared to the previous year, this increase has barely absorbed the industry’s enormous backlog of "dry powder"—that is, undeployed capital ready for investment.

Bain’s global head of private equity, Rebecca Burack, said in an interview that uncertainty caused by Trump’s tariffs abruptly halted deal activity. Just in January 2025, deal momentum still looked "extremely strong."

Fundraising has declined for four consecutive years, falling to $395 billion in 2025, a year-on-year decrease of 16%. Investors have become more selective, demanding funds provide a net internal rate of return above 20%, forcing asset management firms to have clear value creation plans in place before acquiring companies.

Return levels approach 16-year low

Since interest rates began rising in 2022, slowing deal activity has forced private equity managers to return significantly reduced profits to investors. This in turn weakens firms' ability to raise new funds. According to Bain’s report, even though investors have increased allocations to infrastructure and secondary market funds, overall fundraising continues to decline.

Pension funds and endowment funds, among other private equity investors, now require a net internal rate of return over 20% before committing capital. Burack noted that in the past, companies only needed to maintain an annual EBITDA growth rate of 5% before selling portfolio companies.

"Given current interest rate levels and entry/exit valuation multiples, you now need 12% growth annually for five years to achieve the same returns," she said. "12% is the new 5%."

High-quality assets sold out, holding periods extended

Bain’s report points out that private equity firms have already sold off "gem" assets, but have difficulty offloading assets with less certain prospects. Global private equity firms now own about 32,000 portfolio companies, and the average holding period has extended from 5-6 years in 2021 to about 7 years.

Total deal count in 2025 fell 6% to 3,018. Even though large deals like the $56.6 billion privatization of Electronic Arts boosted transaction value, they have done little to absorb the $3.8 trillion backlog of unsold assets in the industry.

"When holding periods exceed five or six years, internal rates of return start to look less attractive," Burack said. As holding periods extend, the pressure on investment returns intensifies further.

Despite the challenges, Burack believes private equity remains a robust investment option able to provide diversified allocation that public markets no longer offer. "It’s just a bit stuck right now," she said.

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